ADOPTED AMENDMENTS 7 TAC CHAPTER 153 Page 1 of 9

ADOPTED AMENDMENTS

7 TAC CHAPTER 153

Page 1 of 9

Title 7. Banking and Securities

Part 8. Joint Financial Regulatory Agencies

Chapter 153. Home Equity Lending

The Finance Commission of Texas and

the Texas Credit Union Commission

("commissions") adopt amendments to

¡ì153.1 (relating to Definitions), ¡ì153.5

(relating to Two Percent Fee Limitation:

Section 50(a)(6)(E)), ¡ì153.12 (relating to

Closing Date: Section 50(a)(6)(M)(i)),

¡ì153.13 (relating to Preclosing Disclosures:

Section 50(a)(6)(M)(ii)), ¡ì153.17 (relating to

Authorized Lenders: Section 50(a)(6)(P)),

¡ì153.22 (relating to Copies of Documents:

Section 50(a)(6)(Q)(v)), ¡ì153.26 (relating to

Acknowledgment of Fair Market Value:

Section 50(a)(6)(Q)(ix)), ¡ì153.45 (relating to

Refinance of an Equity Loan: Section 50(f)),

and ¡ì153.51 (Consumer Disclosure: Section

50(g)) in 7 TAC, Chapter 153, concerning

Home Equity Lending.

The commissions adopt the amendments

to ¡ì153.5, ¡ì153.12, ¡ì153.13, ¡ì153.17,

¡ì153.22, ¡ì153.26, ¡ì153.45, and ¡ì153.51

without changes to the proposed text as

published in the September 10, 2021, issue of

the Texas Register (46 TexReg 5690).

The commissions adopt the amendments

to ¡ì153.1 with changes to the proposed text

as published in the September 10, 2021, issue

of the Texas Register (46 TexReg 5690).

The commissions received no official

comments on the proposal.

7 TAC Chapter 153 contains the

commissions' interpretations of the home

equity lending provisions of Texas

Constitution, Article XVI, Section 50

("Section 50"). In general, the purposes of the

rule changes to 7 TAC Chapter 153 are: (1)

to specify requirements for electronic

disclosures, and (2) to describe Section 50's

applicability to out-of-state financial

institutions.

The interpretations in 7 TAC Chapter 153

are administered by the Joint Financial

Regulatory Agencies ("agencies"), consisting

of the Texas Department of Banking,

Department of Savings and Mortgage

Lending, Office of Consumer Credit

Commissioner, and Texas Credit Union

Department. The agencies distributed an

early precomment draft of proposed changes

to interested stakeholders for review, and

then held an online webinar regarding the

proposed changes. The agencies received one

informal precomment on the rule text draft.

The agencies appreciate the thoughtful input

provided by stakeholders.

Amendments to ¡ì153.1 add definitions

and statutory citations for the terms "E-Sign

Act" (referring to the federal Electronic

Signatures in Global and National Commerce

Act, 15 U.S.C. ¡ì¡ì7001-7006) and "UETA"

(referring to the Texas Uniform Electronic

Transactions Act, Texas Business &

Commerce Code, Chapter 322). The terms

"E-Sign Act" and "UETA" provide a concise

way to refer to these two statutes, and are

used throughout this adoption in connection

with electronic disclosures. Amendments

throughout ¡ì153.1 also renumber other

definitions accordingly.

Based on input from staff of the Texas

Register, changes have been made to the

definitions of "Fair market value" and

"Preclosing disclosure" in ¡ì153.1(10) and

(15), to conform to letter case conventions

used for other defined terms.

ADOPTED AMENDMENTS

7 TAC CHAPTER 153

Page 2 of 9

Amendments to ¡ì153.5 revise the title to

this section to conform to letter case

conventions used in other rules. In addition,

citations to the definition of "interest" in

¡ì153.1 will be updated to reflect the

renumbering described in the previous

paragraph.

Amendments to ¡ì153.12 relate to oral and

electronic loan applications. Section

50(a)(6)(M)(i) provides that a home equity

loan closing must occur at least 12 days after

the owner "submits a loan application to the

lender." New ¡ì153.12(3) explains that a loan

application may be submitted electronically

in accordance with state and federal law

governing electronic disclosures, with

references to the UETA and the E-Sign Act.

These amendments respond to an informal

precomment recommending amendments to

¡ì153.12 on electronic disclosures. An

amendment to ¡ì153.12(2) also replaces the

word "given" with "submitted," to be

consistent with Section 50(a)(6)(M)(i).

An amendment to ¡ì153.13 describes

requirements for providing an electronic

copy of the preclosing disclosure. Section

50(a)(6)(M)(ii) of the Texas Constitution

requires the lender to provide the owner with

a copy of the loan application and a final

itemized disclosure of amounts that will be

charged at closing. The current interpretation

at ¡ì153.13 refers to these items as the

"preclosing disclosure." New ¡ì153.13(4)

explains that the lender may provide the

preclosing disclosure electronically in

accordance with state and federal law

governing electronic signatures and delivery

of electronic documents, and includes

references to the UETA and the E-Sign Act.

The amendment to ¡ì153.13 responds to a

request that the commissions received in

September 2020, while the commissions

were conducting a rule review of Chapter

153. As a result of the rule review, the

commissions amended ¡ì153.22 to specify

that the lender may provide signed

documents electronically in accordance with

state and federal law. In an official comment,

a stakeholder recommended either: (1)

adopting a new section to specify that the

lender may electronically deliver all notices,

disclosures, and documents to the property

owner, or (2) amending Chapter 153's

individual sections on required disclosures to

specify that the lender may electronically

deliver each disclosure. Although the

commissions and the agencies generally do

not object to the use of electronic disclosures,

the commissions received this suggestion too

late in the rulemaking process to include the

proposed changes in the October 2020

adoption of rule review amendments. The

commissions indicated that the agencies

would revisit this issue in the future. After

reviewing the request, the commissions

believe that it is appropriate to amend each

section of Chapter 153 requiring disclosures

individually. This will help ensure that

Chapter 153 remains clear with respect to

which constitutional provision is interpreted

by each section of Chapter 153.

In addition, an informal precomment

recommended that ¡ì153.13 (and other

sections in this adoption) consistently refer to

both electronic signatures and delivery of

electronic documents, when describing

requirements under state and federal law. In

response to this precomment, the new text

throughout this adoption refers to both of

these sets of requirements.

An amendment to ¡ì153.17 describes

Section 50's applicability to out-of-state

financial institutions. Section 50(a)(6)(P) of

the Texas Constitution lists the entities that

are authorized to make home equity loans,

ADOPTED AMENDMENTS

7 TAC CHAPTER 153

Page 3 of 9

and includes "a bank, savings and loan

association, savings bank, or credit union

doing business under the laws of this state or

the United States." New ¡ì153.17(2) specifies

that for purposes of Section 50(a)(6)(P), a

"bank, savings and loan association, savings

bank, or credit union doing business under

the laws of this state or the United States"

includes a financial institution described by

Texas Finance Code, ¡ì201.101(1)(A)-(D)

that is chartered under the laws of another

state and does business in Texas in

accordance with applicable state law,

including the requirements of Texas Finance

Code, ¡ì201.102. The financial institutions

described by Texas Finance Code,

¡ì201.101(1)(A)-(D) are banks (including

savings banks), savings and loan

associations, and credit unions.

The amendment to ¡ì153.17 responds to a

request that the agencies received from an

out-of-state bank in March 2021. The request

asks whether a bank organized under the laws

of another state may make a home equity loan

under the Texas Constitution. The

commissions believe that new ¡ì153.17(2)

appropriately answers this question by

referring to provisions of the Texas Finance

Code that govern out-of-state financial

institutions in Texas.

In an informal precomment, a stakeholder

recommended deleting the phrase "or the

United States" and adding an exception for

institutions doing business under the laws of

the United States. The stakeholder argued

that this text creates an inconsistency because

institutions doing business under the laws of

the United States are not chartered under the

laws of a state. The commissions do not

believe that the adopted amendment to

¡ì153.17 creates an inconsistency. The

amendment uses the word "includes," and

does not suggest that the listed state-

chartered institutions are the entire

population

of

financial

institutions

encompassed by Section 50(a)(6)(P). The

commissions do not believe that the

stakeholder's recommended change would

clarify the text, and have not included it in the

current adoption. However, for clarity, the

adopted amendment to ¡ì153.17 includes the

phrase "state-chartered" before "financial

institution."

An amendment to ¡ì153.22 revises

references to the UETA and the E-Sign Act,

to refer to these statutes consistently with

other sections in this adoption.

An amendment to ¡ì153.26 describes

requirements for electronically signing the

acknowledgment of fair market value.

Section 50(a)(6)(Q)(ix) of the Texas

Constitution requires the lender and the

owner to sign a written acknowledgment of

the fair market value of the homestead

property. New ¡ì153.26(4) explains that the

owner and lender may sign the written

acknowledgment

electronically

in

accordance with state and federal law

governing electronic signatures and delivery

of electronic documents. This amendment

responds to the same September 2020

stakeholder request on electronic disclosures

described earlier in this adoption.

An amendment to ¡ì153.45 describes

requirements for providing an electronic

copy of the refinance disclosure. Section

50(f)(2)(D) of the Texas Constitution

requires the lender to provide a refinance

disclosure to the owner if the owner applies

for a refinance of a home equity loan to a nonhome-equity loan. New ¡ì153.45(4)(E)

explains that the lender may provide the

refinance disclosure electronically in

accordance with state and federal law

governing electronic signatures and delivery

ADOPTED AMENDMENTS

7 TAC CHAPTER 153

Page 4 of 9

of electronic documents. This amendment

responds to the same September 2020

stakeholder request on electronic disclosures

described earlier in this adoption.

An amendment to ¡ì153.51 describes

requirements for providing an electronic

copy of the consumer disclosure. Section

50(g) of the Texas Constitution requires the

lender to provide a consumer disclosure to

the owner at least 12 days before closing a

home equity loan. New ¡ì153.51(2) explains

that the lender may provide the consumer

disclosure electronically in accordance with

state and federal law governing electronic

signatures and delivery of electronic

documents. This amendment responds to the

same September 2020 stakeholder request on

electronic disclosures described earlier in this

adoption.

The rule changes are adopted under

Texas Finance Code, ¡ì11.308 and ¡ì15.413,

which authorize the commissions to issue

interpretations of Texas Constitution, Article

XVI, ¡ì50(a)(5) - (7), (e) - (p), (t), and (u),

subject to Texas Government Code, Chapter

2001.

The constitutional provisions affected by

the adoption are contained in Texas

Constitution, Article XVI, ¡ì50. No statute is

affected by this adoption.

Chapter 153. Home Equity Lending

¡ì153.1. Definitions

Any reference to Section 50 in this

interpretation refers to Article XVI, Texas

Constitution, unless otherwise noted. These

words and terms have the following

meanings when used in this chapter, unless

the context indicates otherwise:

(1) - (6) (No change.)

(7) E-Sign Act--the federal Electronic

Signatures in Global and National Commerce

Act, 15 U.S.C. ¡ì¡ì7001-7006.

(8) [(7)] Equity loan--An extension of

credit as defined and authorized under the

provisions of Section 50(a)(6).

(9) [(8)] Equity loan agreement--the

documents evidencing the agreement

between the parties of an equity loan.

(10) [(9)] Fair market value [Market

Value]--the fair market value of the

homestead as determined on the date that the

loan is closed.

(11) [(10)] Force-placed insurance-insurance purchased by the lender on the

homestead when required insurance on the

homestead is not maintained in accordance

with the equity loan agreement.

(12) [(11)] Interest--As used in

Section 50(a)(6)(E), "interest" means the

amount determined by multiplying the loan

principal by the interest rate over a period of

time.

(13) [(12)] Lockout provision--a

provision in a loan agreement that prohibits a

borrower from paying the loan early.

(14) [(13)] Owner--A person who has

the right to possess, use, and convey,

individually or with the joinder of another

person, all or part of the homestead.

(15) [(14)] Preclosing disclosure

[Disclosure]--The

written

itemized

disclosure

required

by

Section

50(a)(6)(M)(ii).

ADOPTED AMENDMENTS

7 TAC CHAPTER 153

Page 5 of 9

(16) [(15)] Two percent limitation-the limitation on fees in Section 50(a)(6)(E).

(17) UETA--the Texas Uniform

Electronic Transactions Act, Texas Business

& Commerce Code, Chapter 322

¡ì153.5. Two Percent Fee Limitation [percent

fee limitation]: Section 50(a)(6)(E)

An equity loan must not require the

owner or the owner's spouse to pay, in

addition to any interest or any bona fide

discount points used to buy down the interest

rate, any fees to any person that are necessary

to originate, evaluate, maintain, record,

insure, or service the extension of credit that

exceed, in the aggregate, two percent of the

original principal amount of the extension of

credit, excluding fees for an appraisal

performed by a third party appraiser, a

property survey performed by a state

registered or licensed surveyor, a state base

premium for a mortgagee policy of title

insurance with endorsements established in

accordance with state law, or a title

examination report if its cost is less than the

state base premium for a mortgagee policy of

title insurance without endorsements

established in accordance with state law.

(1) - (2) (No change.)

(3) Charges that are Interest. Charges

an owner or an owner's spouse is required to

pay that constitute interest under ¡ì153.1(12)

[¡ì153.1(11)] of this title (relating to

Definitions) are not fees subject to the two

percent limitation.

(A) - (B) (No change.)

(4) Charges that are not Interest.

Charges an owner or an owner's spouse is

required to pay that are not interest under

¡ì153.1(12) [¡ì153.1(11)] of this title are fees

subject to the two percent limitation.

(5) (No change.)

(6) Charges to Originate. Charges an

owner or an owner's spouse is required to pay

to originate an equity loan that are not interest

under ¡ì153.1(12) [¡ì153.1(11)] of this title are

fees subject to the two percent limitation.

(7) (No change.)

(8) Charges to Evaluate. Charges an

owner or an owner's spouse is required to pay

to evaluate the credit decision for an equity

loan, that are not interest under ¡ì153.1(12)

[¡ì153.1(11)] of this title, are fees subject to

the two percent limitation. Examples of these

charges include fees collected to cover the

expenses of a credit report, flood zone

determination, tax certificate, inspection, or

appraisal management services.

(9) Charges to Maintain. Charges

paid by an owner or an owner's spouse to

maintain an equity loan that are not interest

under ¡ì153.1(12) [¡ì153.1(11)] of this title are

fees subject to the two percent limitation if

the charges are paid at the inception of the

loan, or if the charges are customarily paid at

the inception of an equity loan but are

deferred for later payment after closing.

(10) - (11) (No change.)

(12) Charges to Service. Charges paid

by an owner or an owner's spouse for a party

to service an equity loan that are not interest

under ¡ì153.1(12) [¡ì153.1(11)] of this title are

fees subject to the two percent limitation if

the charges are paid at the inception of the

loan, or if the charges are customarily paid at

the inception of an equity loan but are

deferred for later payment after closing.

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